Gross Domestic Product [GDP]

The total value of goods and services produced within the borders of the United States, regardless of who owns the assets or the nationality of the labor used in producing that output. (In contrast, gross national product measures the output of the citizens of the US and the income from assets owned by US entities, regardless of where located.) The growth of output is measured in real terms, meaning increases in output due to inflation have been removed.

Importance:The Federal Reserve’s primary goal is sustained growth of the economy with full employment and stable prices. Real GDP is the most comprehensive measure of the performance of the U.S. economy. By monitoring trends in the overall growth rate as well as the unemployment rate and the rate of inflation, policy makers are able to assess whether the current stance of monetary policy is consistent with that primary goal.

Background:There are several ways of measuring the Gross Domestic Product but by far the most widely used approach is the expenditure method where: GDP = consumption + investment + government spending + (exports ? imports)

In currency terms, the GDP level of different countries may be compared by converting their value in national currency, either by using the current currency exchange rate, where the GDP is calculated by exchange rates prevailing on the international currency markets. This method offers better indications of that country’s international purchasing power and relative economic strength.

Another method of comparison is using the purchasing power parity exchange rate, whereby the GDP is calculated by the PPP (purchasing power parity) of each currency relative to a selected standard, i.e. the US dollar. This method offers a view of the actual living standards of lesser developed countries as it compensates for the weaknesses of the local currencies in world markets.

Source:US Department of Commerce, Bureau of Economic Analysis

Frequency:Quarterly

Availability:Data is typically released during the final week of the month. The first or advance estimate is released during the final week of the month immediately following the end of a calendar quarter.